Shanghai ASIC startup among first to raise capital in Hong Kong's new stock market

HONG KONG -- ASIC developer and distributor Shanghai Fudan Microelectronics Co. Ltd. today said it expects to raise HK$100 ($12.8 million) from 125 million new H Shares that will be offered on the Hong Kong Stock Exchange's new Growth Enterprise Market listing. Two-year-old Fudan Microelectronics is one of the first "H Share" companies to go public on the new Growth Enterprise Market listing.

"In view of the high level of specialization in the IC industry, which is unfamiliar to the general public, we have chosen to place all the new shares with institutional investors," said Shi Lei, general manager of Fudan Microelectronics. "The placement results have demonstrated a very encouraging response from the market, which reflects a very promising future for the company's IC business as viewed by investors."

The company was set up in July 1998 to focus on ASIC designs and system integrations for mainly industrial applications. The company groups its products into five categories: telecommunications, smart cards, motors in vehicles, power supplies, and consumer electronic products. Initially, the applications are in China's chip market.

Fudan Microelectronics said it recorded a turnover of RMB 2.6 million during the first year ofoperations, followed by an increase of 434% to RMB14.0 million in 1999. Gross profit grew from RMB1.1 million in 1998 to RMB5.7 million in 1999, according to the company.

"Fudan Microelectronics' business has been developing rapidly," said Shi. "We have already established a significant role in the PRC market since our commencement of operations two years ago." He added that the company intends to play in ASIC and chip markets outside of China.

"To become one of the leading ASIC design companies in the world is our ultimate goal," Shi added.

Fudan Microelectronics' net proceeds from this week's stock offering--after deducting related expenses--will total HK$85 million ($10.8 million). About 39% of those proceeds will go to design, research, and development of IC products. About 19% will be spent on upgrading the company's design capabilities. Fifteen percent will go to product marketing and distribution, with the rest being used as working capital, said the company.

"The domestic demand for IC products has been rising annually in China. Nevertheless, there has been heavy reliance on the imported supply of IC products," Shi said. "The total volume of imported ICs in 1998, for instance, amounted to 11,600 million units, representing 80% of the aggregate domestic demand. This was due to IC design companies in the PRC lacking the technical expertise to design certain IC products."

Shi noted that China's government has provided support for the development of chip companies. "For example, the PRC Ministry of Science and Technology approved the establishment of an 'IC design base' in Shanghai in February 2000," he said. "Fudan Microelectronics has been designated a 'new and advanced technology enterprise' by the Shanghai New Advanced Technology Enterprise Assessment Office which entitles us to preferential policies such as tax relief."